President McKinley's Policy And The Nation's Future

( Originally Published Early 1900's )

ALTHOUGH President McKinley's inaugural address was published long since,
it contains much valuable material and profound thought, that, more fully
elucidated by the progress of events, will be highly interesting for many
years to come. In this chapter, therefore, I propose to make a brief
resume of the policy of the President as outlined in his inaugural
address, especially his financial policy. That address was unique in the
manner in which it got down to the most important business without any
preliminaries. The President first described the business situation, as he
found it, in the most succinct terms. After a few introductory remarks, he
said: - "The responsibilities of the high trust to which I have been
called - always of grave importance - are augmented by the prevailing
business conditions, entailing idleness upon willing labor and loss to
useful enterprises. "The country is suffering from industrial
disturbances, from which speedy relief must be had. "Our financial system
needs some revision; our money is all good now, but its value must not
further be threatened. It should all be put upon an enduring
basis, not subject to easy attack, nor its stability to doubt or dispute.
"Our currency should continue under the supervision of the government. The
several forms of our paper money offer, in my judgment, a constant
embarrassment to the government, and a safe balance in the Treasury is
absolutely indispensable. Therefore I believe it necessary to devise a
system which, without diminishing the circulation medium or offering a
premium for its contraction, will present a remedy for these arrangements
which, temporary in their nature, might well in the years of our
prosperity have been displaced by wiser provisions. "With adequate revenue
secured, but not until then, we can enter upon such changes in our finance
laws as will, while insuring safety and volume to our money, no longer
impose upon the government the necessity of maintaining so large a gold
reserve, with its attendant and inevitable temptations to speculation.
Most of our financial laws are the outgrowth of experience and trial, and
should not be amended without investigation and demonstration of the
wisdom of the proposed changes. We must be both ' sure we are right ' and
'make haste slowly."' When adequate revenue was once secured, many of the
financial difficulties, out of which there seemed no easy way during the
previous two or three years, found their own solution. For instance, the
necessity for bond sales to replenish the gold reserve no longer existed.
This was an inevitable result which the former administration could never
see and which the McKinley administration demonstrated with ease; nor was
it entitled to very much credit for its discernment, except as compared
with its predecessor. " Our money is all good now, but its value must not
be further threatened," said the President. These words are very
significant, especially in their application to those who have been
proposing reforms since the inauguration which would strike at the very
root of Mr. McKinley's wise recommendation. This "value " to which he
refers would certainly be further "threatened" by retiring the greenbacks
and the Treasury notes, and thus converting a non-interest-bearing debt of
$500,000,000 into an interest-bearing one. "It has been our practice," said the
President, "to retire. not to increase, outstanding obligations." This,
certainly, though mild in form, was a very strong rebuke in its essence to
those who were diametrically and avowedly opposed to these views. Of
course it is all right for cabinet officers to cherish their own
independent opinions, but if they try to enforce them when they are not in
harmony with the views of the majority of the cabinet or of the President,
I think it has a decided tendency to cause discord. The whole plan of
providing a sufficient revenue, and at the same time laying the true
foundation of national prosperity, is ably condensed in the following
remarks of the President: - "The government should not be permitted to run
behind or increase its debt in times like the present. " Suitably to
provide against this is the mandate of duty, the certain and easy remedy
for most of our financial difficulties. A deficiency is inevitable so long
as the expenditures of the government exceed its receipts. It can be met
only by loans or an increased revenue. "While a large annual surplus of
revenue may invite waste and extravagance, inadequate revenue creates
distrust and undermines public and private credit. "Neither should be
encouraged. Between more loans and more revenue there ought to be but one
opinion. We should have more revenue, and that without delay, hindrance,
or postponement. "A surplus in the Treasury created by loans is not a
permanent or safe reliance. It will suffice while it lasts, but it cannot
last long while the outlays of the government are greater than its
receipts, as has been the case during the past two years. Nor must it be
forgotten that, however much such loans may temporarily relieve the
situation, the government is still indebted for the amount of the surplus
thus accrued, which it must ultimately pay, while its ability to pay is
not strengthened but weakened by a continued deficit. "Loans are
imperative in great emergencies to preserve the government or its credit,
but a failure to supply needed revenue in time of peace for the
maintenance of either has no justification. " The best way for the
government to maintain its credit is to pay as it goes (not by resorting
to loans, but by keeping out of debt), through an adequate income secured
by a system of taxation, external or internal, or both. "It is the settled policy of
the government, pursued from the beginning and practiced by all parties
and administrations, to raise the bulk of our revenue from taxes upon
foreign productions entering the United States for sale and consumption,
and avoiding for the most part every form of direct taxation, except in
time of war. "The country is clearly opposed to any needless additions to
the subjects of internal taxation, and is committed by its latest popular
utterance to the system of tariff taxation. There can be no
misunderstanding, either, about the principle upon which this tariff
taxation shall be levied. Nothing has ever been made plainer at a general
election than that the controlling principle in the raising of revenue
from duties on imports is zealous care for American interests and American
labor. The people have declared that such legislation should be had as
will give ample protection and encouragement to the industries and the
development of our country. "It is therefore earnestly hoped and expected
that Congress will, at the earliest practicable moment, enact revenue
legislation that shall be fair, reasonable, conservative, and just, and
which, while supplying sufficient revenue for public purposes, will still
be generally beneficial and helpful to every section and every enterprise
of the people. To this policy we are all, of whatever party, firmly bound
by the voice of the people,-a power vastly more potential than the
expression of any political platform. " The paramount duty of Congress is
to stop deficiencies by the restoration of that protective legislation
which has always been the firmest prop of the Treasury. The passage of
such a law or laws would strengthen the credit of the government, both at
home and abroad, and go far toward stopping the drain upon the gold
reserve held for the redemption of our currency, which has been heavy and
well-nigh constant for several years." The President was exceedingly
circumspect in these recommendations. He very adroitly anticipated and
forestalled the critics who were keeping ostentatious and pretentious
watch over Uncle Sam's purse. In this instance he drew the line between
these two extremes of a large surplus and a deficiency which have proved
the Scylla and Charybdis of some other administrations. It has been a
feast or a famine with some of them: either too much money, or else an
embarrassment that menaced the country with a burden of debt and the payment of a big
interest bill for many years to come. President McKinley can strike very
hard without being offensive, and he has a peculiar knack of conveying a
profound meaning in what seem to be the most unstudied expressions, as
when he said, for instance, "A surplus created by loans is not a safe
reliance." The last sentence of the above quotation from the inaugural
address is unique in that it so combines the two indispensable points in
legislation, "revenue" and the "tariff," as to show clearly without
argument that they cannot be considered apart. It completely forestalls in
a very simple style some of the favorite arguments of the free-traders,
and shuts off by way of anticipations a flood of opposition oratory long
since prepared to burst forth on the first favorable occasion. Events
since this very comprehensive inaugural address was delivered have fully
justified the wisdom and foresight which are implied in its sage advice.
While many financiers and professors of economics were working hard over
currency schemes, the advice of the President to "go slow" was both timely
and prudent, and the admonition is as good to-day as it was then. His
counsel concerning the most judicious methods of going about the question
of currency reform is worthy of the most profound consideration of all who
are interested in this subject; and it should be carefully studied by
those who imagine that they have made the only true discovery in the
department, before they rashly run into print with the publication of
their views. He says: - " If, therefore, Congress in its wisdom shall deem
it expedient to create a commission to take under early consideration the
revision of our coinage, banking, and currency laws, and give them that
exhaustive, careful, and dispassionate examination that their importance
demands, I shall cordially concur in such action. "If such power is vested
in the President, it is my purpose to appoint a commission of prominent,
well-informed citizens of different parties, who will command public
confidence both on account of their ability and special fitness for the
work. Business experience and public training may thus be combined, and
the patriotic zeal of the friends of the country be so directed that such a report will be made as to receive the support of
all parties, and our finances cease to be the subject of mere partisan
contention. The experiment is, at all events, worth a trial, and in my
opinion it can but prove beneficial to the entire country. "The question
of international bimetallism will have early and earnest attention. "It
will be my constant endeavor to secure it by cooperation with the other
great commercial powers of the world. Until that condition is realized
when the parity between our gold and silver money springs from, and is
supported by, the relative value of the two metals, the value of the
silver already coined, and of that which may hereafter be coined, must be
kept constantly at par with gold by every resource at our command. The
credit of the government, the integrity of its currency, and the
inviolability of its obligations must be preserved. This was the
commanding verdict of the people, and it will not be unheeded." The latter
part of this advice about keeping the value of silver at par with gold
until bimetallism on international principles shall be realized, fell foul
of several well-matured schemes in both the Republican and Democratic
ranks to get silver out of circulation as suddenly as possible, both sides
failing to see that the success of such a policy would give the free
silverites the greatest triumph they have yet had, and would be a bad blow
at the gold standard. Such a serious and sudden contraction of the
currency, without something no more expensive than silver to supply its
place, might readily cause one of the greatest panics in history, and
enable the free silverites to say that their theory of the expansion of
the currency volume would have prevented all this; the fact being,
however, that free coinage of silver would probably have brought about an
even worse calamity. The President's comments, therefore, on this phase of
the subject, were not only timely but full of financial wisdom, and showed
the extensive range of financial vision with which he is endowed. No doubt
he had in his mind the ordeal of business embarrassment through which
Germany passed during the few years succeeding her demonetization of
silver, although she had the immense store of gold furnished
by the French was indemnity to rely upon. The following points on
reciprocity and the power of Congress in restoring prosperity show the
President's keen appreciation of the then existing emergencies, as well as
the means of relief:" In revision of the tariff, special attention should
be paid to the reenactment and extension of the reciprocity principle of
the law of I890, under which so great a stimulus was given to foreign
trade. " It will take some time to restore the prosperity of former years,
but we can resolutely turn our faces in that direction, and aid its return
by friendly legislation. The restoration of confidence and the revival of
business depend more largely upon the prompt, energetic, and intelligent
action of Congress than upon any other single agency affecting the
situation." The "reciprocity principle" was suppressed by mere partisan
feeling, but it is hoped that we shall yet benefit largely by its revival.
At the conclusion of the inaugural address the President dilated further
on the necessity of the special session, and corrected some popular errors
concerning its purpose and influence. He said: - " I do not sympathize
with the sentiment that Congress in session is dangerous to our general
business interests. Its members are the agents of the people, and their
presence at the seat of government in the execution of the sovereign will
should not operate as an injury but a benefit. There could be no better
time to put the government upon a sound financial and economic basis than
now. "The people have only recently voted that this should be done, and
nothing is more binding upon the agents of their will than the obligation
of immediate action. It has always seemed to me that the postponement of
the meeting of Congress until more than a year after it has been chosen,
deprived Congress too often of the inspiration of the popular will, and
the country of the corresponding benefits. " It is evident, therefore,
that to postpone action in the presence of so great a necessity would
be unwise on the part of the Executive, because unjust to the interests of
the people. Our actions now will be freer from mere partisan consideration
than if the question of tariff revision was postponed until the regular
session of Congress. "We are nearly two years from a congressional
election, and politics cannot so greatly distract us as if such contest
was immediately pending. We can approach the problem calmly and
patriotically, without fearing its effect upon an early election." The
peroration of this address is so fine, patriotic, and conciliatory in tone
and sentiment, that I consider it worthy of being given in full. "In
conclusion, I congratulate the country upon the fraternal spirit of the
people and the manifestations of good will everywhere so apparent. The
recent election not only most fortunately demonstrated the obliteration of
sectional or geographical lines, but to some extent also the prejudices
which for years have distracted our councils and marred our true greatness
as a nation. " The triumph of the people, whose verdict is carried into
effect to-day, is not the triumph of one section, nor wholly of one party,
but of all sections and all the people. The North and the South no longer
divide on the old lines, but upon principles and politics; and in this
fact surely every lover of the country can find cause for true
felicitation. " Let us rejoice in and cultivate this spirit; it is
ennobling, and will be both a gain and blessing to our beloved country. It
will be my constant aim to do nothing, and permit nothing to be done, that
will arrest or disturb this growing sentiment of unity and cooperation,
this revival of esteem and affiliation which now animates so many
thousands in both the old antagonistic sections; but I shall cheerfully do
everything possible to promote and increase it. " Let me again repeat the
words of the oath administered by the Chief Justice, which, in their
respective spheres, so far as applicable, I would have all my countrymen
observe: 'I will faithfully execute the office of President of the United
States, and will, to the best of my ability, preserve, protect, and defend
the Constitution of the United States.' "This is the obligation I have
reverently taken before the Lord Most High. To keep it will be my single
purpose, my constant prayer, and I shall confidently rely upon the
forbearance and assistance of the people in the discharge of my solemn responsibilities.' " It is interesting to reflect
how vividly these sentiments of the oneness of all sections were
illustrated during the war with Spain. Apropos of Mr. McKinley's reference
to reciprocity, it is presumed by the free-trade element in politics that
if got down to a free-trade level it would greatly encourage and stimulate
other nations to purchase our goods, produce, and manufactures; or, in
other words, that it would "extend our foreign markets," as the ordinary
free-trade phraseology has it. There is no good reason, resting upon
business principles, to expect any such result. Nations, like individuals,
buy in the cheapest market and sell in the dearest, the latter being the
chief reason why England is anxious to obtain control of our markets for
her goods. The people of other nations will not buy anything for
friendship's sake from us that they can get cheaper elsewhere; and
certainly we do not put any tariff on the goods that we send abroad,
though free-traders talk as if we did. We sell at rates that will enable
us to compete with foreign manufacturers, if we can produce the article
cheap enough to come down to that scale. If we cannot, we have to do the
best we can with our home market; and if, as free-traders hold, our home
market is already overcrowded, it will certainly not stop the native glut
if we give away a large portion of what is too small for ourselves to
British manufacturers and to investors, speculators, and adventurers in
British and foreign goods. The people who talk free trade seem to forget,
when they tell us about the money we save in buying foreign goods, that
the home-made goods afford about one third or more of the working
population of this country the means of earning a living, through the
prudent and skillful investment, by our own manufacturers, of money which
would on free-trade principles go abroad. It may be objected that the
manufacturers on this side take the lion's share of the profits. We may
grant that; but do not the British manufacturers and manufacturers of
other nations do the same? They are certainly not philanthropists in
business. Besides, they do not possess the merit of leaving half as much residue for wages
as the American manufacturers do. To put the case even as strongly as the
most rabid socialist would do, namely, that it is "robbery," then it is
robbery on both sides of the Atlantic; and, if we are forced to a choice
between two robbers, is it not better to choose the one that will give us
enough of the plunder to feed and clothe us decently, than to permit
ourselves to be victimized by the other, who will reduce us to starvation
and rob our own "robber" manufacturers besides? I, for one, should
certainly prefer to be " robbed " by our native monopolists, who generally
keep the money in the country where I have a chance of getting some of it,
even though it be not a fair share, than to throw myself and the fruits of
my labor recklessly into the hands of foreign pirates, who spend it in
Europe where we never have a ghost of a chance of getting back a solitary
cent. If this argument is not clear and conclusive, common sense must be a
very scarce commodity, and therefore an article of great value, according
to the political economists. One of the strong charges of the free-traders
is that the former McKinley Law prevented importation in order to give the
American market to "trusts and combines." Suppose, it will be granted for
the sake of argument, that they were American trusts and combines, not
British or foreign? This is simply the same argument, and the same answer
applies to it. The McKinley Law was "A bill to reduce taxation, and for
other purposes." Paradoxical as it may seem, it was more of a free trade
bill in one sense of the term than was the Wilson measure as the latter
finally passed, which put only 48 per cent. of all our importations of
merchandise on the free list, while the McKinley Law let in 60 per cent.
of the whole list free of duty. There was this important distinction,
however, with regard to the quality and class of the goods: The McKinley
Law admitted as few articles as possible that came in competition with our
manufacturers, artisans, farmers, mechanics, and laborers, while the goods
which the Wilson measure admitted came largely in direct competition with
all these. These five special classes of our industrial system have had
the object lesson which enables them to draw conclusions from their own respective standpoints; and they expressed
their views very forcibly, more in actions than words, by the election of
President McKinley by an overwhelming majority, and by the return of
positive working majorities in both houses of Congress, in which the
majorities four years previously were so decidedly in favor of something
akin to free trade that the Democrats were predicting the enjoyment of
half a century of unassailable power in office. But the people again
proved that they themselves are the disposing power. It required this
object lesson to teach the would-be reformers the great object lesson that
was to be the forerunner of national prosperity. And now what has become
of all the free-traders, with their panaceas and specifics for all
financial ills? If they are dead, have they no successors among their many
admirers of the past? Seldom has there been in politics such a large
conversion of a big majority into a vanishing minority. It is important to
note the fact that President McKinley favored revision, but not revolution
of the tariff, and a remodeling of the currency without diminishing its
volume. He did not propose " taking the government out of the banking
business" either; but he did propose taking the currency revision out of
politics by placing it in the hands of a commission composed of up-to-date
business men, irrespective of party politics. "Taking the government out
of the banking business," "The endless chain," " The greenbacks must go,"
and other phrases of that kind should now be considered as having gone
down with the general wreck. One of the best and most reassuring
utterances of President McKinley in his inaugural address is this
sentence: "The value of silver already coined or to be coined must be kept
at par with gold by every resource at our command. The credit of the
government and the integrity of its obligations must be preserved." If Mr.
Cleveland had made a similar statement in his inaugural address four years
before, this country might have been saved from the disastrous panics
which took place during his term. I think, in conclusion, that a word of
friendly counsel which I have already suggested, might not be out of place, as far as the present Secretary of the Treasury is
concerned. Mr. Gage favors taking up the greenbacks, thereby relieving the
government from the responsibility of sustaining gold payments and putting
that obligation upon the national banks. He admits that it would result in
a contraction of the currency which would depress values generally, but he
says the situation would adjust itself through that process, as values
would go down sufficiently low to induce foreign buying, which would make
gold flow this way, so supplementing the currency thus contracted. To
bring about a condition of depression such as Mr. Gage suggests, for the
purpose of making bargains in our securities and products for the benefit
of foreigners, would be resented by the people injured thereby in every
State. The very thing that reduced securities and commodities to panic
prices would revive the silver mania, on the belief of the need of more
money, and would justify foreign capitalists in believing that this
country was surely going to drift to a silver basis. If once they believed
that, they would not buy our securities, however low in price; but, on the
contrary, the lower they sold, the more Europe would liquidate what they
held. That was the experience during the last silver dementia. The taking
up of greenbacks by the government would of course save the United States
Treasury from being exposed to the suspension of gold payments; but it
would be at the expense of the national banks, as it would take from them
the money which they now hold for their reserves and for the redemption of
their notes. The banks in times of severe depression and distrust would
then be almost sure to suspend gold payments; besides, as soon as the
government went out of the legal tender currency business, the national
banks would immediately begin to contract their circulation rather than be
exposed sooner or later to a default in payment when gold should be
demanded for their notes. A severe depression in business, such as Mr.
Gage proposes, would surely elect some such man as William Jennings Bryan
as President of the United States in 1900. We had better "bear the ills we
have than fly to others that we know not of."